Ch. Hanumantha Rao, Hyderabad, Hyderabad V. ITO, Ward 1, Sangareddy, Sanga Reddy

ITA 690/HYD/2015

• Counselvise Citation: [2017] 130 COUNSELVISE.COM (IT) 6176 (ITAT-HYDERABAD)
• Duration Of Justice: 1 year(s) 8 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-02-2017
• Appeal Filed By: Assessee
• Bench Allotted: B
• Next Hearing Date: 13-07-2016
• Assessment Year: 2009-2010
• Appeal Filed On: 22-05-2015
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Unexplained investment; Business expenditure
• Section: 32; 147; 131; 68; 246; 69; 145; 27; 148; 54; 37; 6; 56; 263; 63; 132; 12; 28; 144; 10; 90; 154; 2; 11; 15; 271(1)(b); 80C; 139; 92

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCHES B (SMC), HYDERABAD BEFORE SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER I.T.A. NO. 690/HYD/2015 ASSESSMENT YEAR: 2009-10 CH. HANUMANTHA RAO, SADASHIVPET, [PAN: AEPPC6930G] VS THE INCOME TAX OFFICER, WARD-1, SANGAREDDY (APPELLANT) (RESPONDENT) FOR ASSESSEE : SHRI K.C. DEVDAS, AR FOR REVENUE : SHRI K.J. RAO, DR DATE OF HEARING : 03-02-2017 DATE OF PRONOUNCEMENT : 08-02-2017 O R D E R THIS IS AN APPEAL BY ASSESSEE AGAINST THE ORDER OF TH E COMMISSIONER OF INCOME TAX (APPEALS)-2, HYDERABAD, DATED 20-03-2015. 2. BRIEFLY STATED FACTS OF THE CASE ARE THAT ASSESSEE I S A TRADER IN SEEDS AND PESTICIDES HAVING BUSINESS IN THE NAME AND STYLE OF SHRI RYTU SEVA KENDRA. HE HAS FILED RETURN OF INCOME FOR AY. 2009-10 DECLARING TOTAL INCOME OF RS. 1,70,210/- WHICH INCLUDED INCOME FROM BUSINESS AT RS. 2,48,254/- DECLARED UNDER THE PR OVISIONS OF SECTION 44AF, INCOME FROM HOUSE PROPERTY AND OTHER SOURCES. ASSESSEE ALSO DECLARED AGRICULTURAL INCOME OF RS. 3 ,38,000/- WHICH WAS ACCEPTED. HOWEVER, IN THE COURSE OF SCRUTINY ASS ESSMENT, ASSESSING OFFICER (AO) NOTICED THAT THE TOTAL CREDITS IN THE BANK ACCOUNT ARE TO THE TUNE OF RS. 46,01,217/-, WHEREAS TOTAL OUTFLOW I.T.A. NO. 690/HYD/2015 CH. HANUMANTHA RAO :- 2 - : DURING THE YEAR WAS TO THE TUNE OF RS. 73,02,226/-. THE DIFFERENCE OF RS. 27,01,009/- WAS ASKED TO BE EXPLAINED. AFTER ASSESSEES EXPLANATION, THE AO GAVE CREDIT FOR AN AMOUNT OF HOUSE RENT RECEIVED OF RS. 1,20,000/- AND AGRICULTURAL INCOME OF RS. 3,38,000/- AND THE BALANCE AMOUNT OF RS. 22,43,009/- WAS TREATED AS UNEXPLAINED INVESTMENT IN THE HANDS OF ASSESSEE. APART FROM THE ABOVE, AO ALSO DISALLOWED INTEREST PAYMENT OF RS. 4 7,605/- ON THE HOUSING LOAN AND CLAIM OF PRE-PAYMENT OF PRINCIPA L OF RS. 47,605/- U/S. 80C OF THE ACT. 3. BEFORE THE LD. CIT(A), ASSESSEE EXPLAINED THAT HE H AS SHARE DERIVATIVE TRANSACTIONS IN WHICH HE HAS INCURRED LOSSE S AND ALSO EXPLAINED THE SOURCES FROM THE CREDITORS RS. 16,74,000 /- AND ALSO LOAN FROM BANK. LD. CIT(A) REMANDED THE ISSUE TO THE FILE OF AO FOR EXAMINATION. IN THE REMAND REPORT, THE AO HOWEVER, HAS NOT ACCEPTED THE REVISED BALANCE SHEET, FILED WITH THE AO IN THE COURSE OF ASSESSMENT PROCEEDINGS AND OPINED THAT THE ADDITION WAS MADE CORRECTLY. LD. JOINT COMMISSIONER WHILE FORWARDING THE REPORT HOWEVER, GAVE CREDIT TO THE SUNDRY CREDITORS AND BANK LOAN, BUT HOWEVER, ASKED THE CONFIRMATION OF THE AMOUNTS AS THER E ARE DIFFERENCES BETWEEN EARLIER BALANCE SHEET AND REVISE D BALANCE SHEET. LD. CIT(A) WITHOUT MUCH DISCUSSION ON THE FA CTS, HOWEVER, REJECTED ASSESSEES CONTENTIONS ON ALL THE THREE ISSUE S. 4. LD. COUNSEL FILED THE RECONCILIATION OF THE AMOUNTS AS UNDER: I.T.A. NO. 690/HYD/2015 CH. HANUMANTHA RAO :- 3 - : WORKING OF AO: SOURCES APPLICATIONS TO DEPOSIT IN BANK (INCLUDES 9,00,000 RECEIVED FROM SHARES INVESTMENT) TO DIFFERENCE AS PER A.O FOR WHICH EXPLANATION IS GIVEN 46,01,217 27,01,009 ---------------- 73,02,226 INVESTMENT IN SHARES (DERIVATIVES) BUSINESS EXPENSES PURCHASE OF PROPERTY 37,00,000 32,98,226 3,04,000 ---------------- 73,02,226 I. DETAILS OF CASH DEPOSITS OF RS. 46,01,217 CASH SALES RS. 31,49,000 CREDIT SALES RECEIPTS RS. 5,51,816 BANK INTEREST 400 TRANSFERRED FROM SHARES A/C 9,00,000 ----------------- 46,01,216 ----------------- SOURCES APPLICATIONS RENT AGRICULTURE INCOME UNEXPLAINED INVESTMENT 1,20,000 3,38,000 -------------- 4,58,000 22,43,005 --------------- 27,01,005 DIFFERENCE TO BE EXPLAINED 27,01,005 ------------- 27,01,005 III. WHILE COMPUTING THE DIFFERENCE THE FOLLOWING S OURCES WERE NOT CONSIDERED BY THE A.O SUNDRY CREDITORS 16,74,100 (PLEASE SEE PAGE 100 O F P.B) BUSINESS PROFIT 2,48,254 (PLEASE SEE PAGE 57 OF P.B) ---------------- TOTAL 19,22,354 DIFFERENCE 3,20,655 (ATTRIBUTABLE TO BUSINESS FUNDS) --------------- AMOUNT ADDED BY A.O 22,43,009 --------------- I.T.A. NO. 690/HYD/2015 CH. HANUMANTHA RAO :- 4 - : IV. THE INVESTMENT IN SHARES (DERIVATIVES) IS RS. 3 7 LAKHS. WHILE THE AMOUNT RETURNED ON TRADING IN SHARES IS RS. 9,00,00 0 BOTH ARE CONSIDERED BY THE A.O. THE DIFFERENCE IS RS. 28 LAKHS. A SUM OF RS. 28,39,793 WAS CLAIMED AS LOSS IN THE REVISED COMPUTATION OF TOTAL INCOME. . 5. IT WAS THE SUBMISSION THAT AO HAS NOT EXAMINED THE TRANSACTIONS PROPERLY AND THE LOSS INCURRED BY ASSESSE E IN THE DERIVATIVES HAS NOT BEEN ALLOWED. IF THAT IS ALLOWED , THERE WILL BE NO ADDITION. WHILE ADMITTING THAT THERE IS A DIFFERENCE OF RS. 3,20,655/- ATTRIBUTABLE TO BUSINESS FUNDS, THE SAME WOUL D BE NETTED-OFF TO THE LOSS COMPUTED IN THE DERIVATIVE TRANSAC TIONS. LD. COUNSEL WAS ASKED TO EXPLAIN THE EXTENT OF DERIVATIVE TRANSACTIONS AS THERE ARE DIFFERENCES IN THE ACCOUNTS FURNISHED AT O NE PLACE, THE DERIVATIVE TRANSACTIONS TOTALLED TO RS. 11,40,66,265/- [P G.93 OF THE PAPER BOOK], WHEREAS THE DETAILS OF SCRIP-WISE TRANSAC TIONS PLACED FROM PAGE NOS. 178 TO 182 INDICATE TOTAL TRANSACTIONS TO THE TUNE OF RS. 30,02,19,487/-. LD.COUNSEL FAIRLY ADMITTED THAT THE STATEMENTS INDICATE LOSS OF RS. 28,44,698/-, WHICH ALSO IS SIMI LAR TO THE EARLIER PAGES, BUT ADMITTED THAT NO AUDIT WAS DONE AND THIS CLAI M MADE BEFORE THE CIT(A) WAS NOT ADJUDICATED. 6. LD.DR, IN REPLY SUBMITTED THAT ASSESSEE HAS FILED O RIGINAL BALANCE SHEET AND P&L A/C IN WHICH THE SUNDRY CREDITO RS AND SHARE TRADING TRANSACTIONS ARE NOT REFLECTED AND ONLY WHEN THE AO STARTED ENQUIRY, ASSESSEE FILED REVISED BALANCE SHEET JUST BEFORE THE CONCLUSION OF ASSESSMENT, WHICH THE AO HAS REJECTE D AND IN THE REMAND REPORT, ASSESSEE HAS NOT JUSTIFIED THE TRANSA CTIONS AS CONCLUDED BY THE LD. CIT(A). IT WAS SUBMITTED THAT THE A O HAS RIGHTLY ARRIVED AT UNEXPLAINED INVESTMENT WHICH WAS BR OUGHT TO TAX. I.T.A. NO. 690/HYD/2015 CH. HANUMANTHA RAO :- 5 - : 7. AFTER CONSIDERING THE RIVAL CONTENTIONS AND PERUSING THE DOCUMENTS ON RECORD, I AM OF THE OPINION THAT THE ENTIR E ASSESSMENT HAS TO BE RE-CONSIDERED/RE-EXAMINED BY THE AO. FIRST OF ALL, IT TOOK CONSIDERABLE TIME AND EFFORT TO UNDER STAND THE ACTION OF THE AO. WHILE ARRIVING AT THE TOTAL OUTFLOW, AO HAS C ONSIDERED THE EXPENDITURE TO THE EXTENT SHOWN IN THE P&L A/C, NET INVESTMENT MADE IN THE BALANCE SHEET AND THE OUTFLOW IN T HE BANK ACCOUNTS. WHILE CONSIDERING THE RECEIPTS, AO HAS ONL Y CONSIDERED THE CREDITS IN THE BANK ACCOUNT. THIS SORT OF RECONCILI ATION OF AMOUNTS CERTAINLY RESULTS IN MISMATCH. AS SEEN FROM THE FIRST PAGE OF THE ASSESSMENT ORDER, THE CASE WAS SELECTED FOR EX AMINING THE CASH DEPOSITS IN THE BANK ACCOUNT AS PER THE CASS. IN STEAD OF EXAMINING THE CASH DEPOSITS IN THE BANK ACCOUNT OR THE CREDITS IN THE BOOKS OF ACCOUNT, AO UNDERTOOK THE EXERCISE OF RECO NCILING RECEIPTS AND PAYMENTS, IN WHICH ALL RECEIPTS ARE NOT CO NSIDERED. IT WAS ASSESSEES CONTENTION THAT THERE ARE RECEIPTS IN TH E FORM OF SUNDRY CREDITORS AND ALSO LOANS AND AS PER THE RECONC ILIATION, THERE WILL BE ONLY A DIFFERENCE OF RS. 3,20,655/-. I T WAS THE SUBMISSION THAT THE ENTIRE DERIVATIVE TRANSACTIONS UNDER TAKEN BY ASSESSEE HAS RESULTED IN ON LOSS OF RS. 28,39,793/- . HOWEVER, THIS ASPECT WAS NOT EXAMINED/ ACCEPTED AT ALL BY THE AO EITHE R DURING THE ASSESSMENT PROCEEDINGS OR DURING THE REMAND PROCEE DINGS. HE HAS ONLY TAKEN INTO ACCOUNT THE AMOUNT OF RS. 37 LAKHS PAID TOWARDS SHARE INVESTMENTS WHEREAS THE TOTAL TRANSACTIONS UNDERTAKEN BY ASSESSEE DURING THE YEAR AMOUNTED ALMOS T TO THE TUNE OF RS. 30 CRORE. EVEN THOUGH THE STATEMENT PLACED ON RECORD INDICATES TRANSACTIONS FROM 21-03-2008, THE AO IS DIREC TED TO CONSIDER THE TRANSACTIONS FROM 01-04-2008 TO 31-03-200 9 PERTAINING TO THIS YEAR AND EXAMINE THE AMOUNTS PAID TO THE I.T.A. NO. 690/HYD/2015 CH. HANUMANTHA RAO :- 6 - : BROKER, AMOUNTS INVESTED IN DERIVATIVE TRANSACTIONS, TH E OTHER BUSINESS TRANSACTIONS AFRESH AND RECONCILE WITH THE CAS H BOOK AND THE BANK ACCOUNT. FOR THIS PURPOSE, I HEREBY SET ASID E THE ORDERS OF THE AO AND CIT(A) AND RESTORE THE ENTIRE ASSESSMENT TO THE FILE OF THE AO TO DO IT AS PER THE FACTS AND LAW. ASSESSEE SHOU LD BE GIVEN DUE OPPORTUNITY AND HIS CONTENTIONS SHOULD BE CONSIDER ED IN DETAIL. ACCORDINGLY, THE GROUNDS ARE CONSIDERED ALLOW ED FOR STATISTICAL PURPOSES. 8. IN THE RESULT, APPEAL OF ASSESSEE IS ALLOWED FOR S TATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 8 TH FEBRUARY, 2017 SD/- (B. RAMAKOTAIAH) ACCOUNTANT MEMBER HYDERABAD, DATED 8 TH FEBRUARY, 2017 TNMM COPY TO : 1. CH. HANUMANTHA RAO, SADASHIVPET, C/O. B. NARSING RAO & CO., CHARTERED ACCOUNTANTS, PLOT NO. 554, ROAD NO . 92, JUBILEE HILLS, HYDERABAD. 2. THE INCOME TAX OFFICER, WARD-1, SANGAREDDY. 3. COMMISSIONER OF INCOME TAX(APPEALS)-2, HYDERABAD . 4. THE PR. COMMISSIONER OF INCOME TAX-2, HYDERABAD. 5. D.R. ITAT, HYDERABAD. 6. GUARD FILE.